Banking Agenda – Issue 2, 2016
Latest insights and thought leadership for our banking and capital markets
This edition of Banking Agenda features EY’s analysis of the Australian major banks’ half year results, in addition to providing insights on the key challenges and opportunities for the banking sector.
Australia’s big four banks have posted slowing results in their 2016 half year announcements. Our analysis of the half year results of the major banks shows headline cash earnings after tax of $14.8 billion, a decrease of 2.5% from the prior comparative period.
After enduring periods of contraction, net interest margins have stabilised on an average basis, notwithstanding the variations between banks. This is a result of re-pricing loans in the back book and the ‘passing on’ of slightly higher funding costs, however the Reserve Bank’s reduction in the cash rate means the banks may face further margin pressure.
Tight cost management remains key to maintaining returns, but increased regulatory and compliance costs, coupled with the need to invest in innovation and growth programs, are reducing the impact of the banks’ efficiency measures.
Ongoing advances in automation technologies, such as robotics, are challenging the traditional business case for digitising banking operations – disrupting offshoring and outsourcing models. A greater level of process automation has the potential to not only reduce costs, but to help increase control, meet regulatory requirements and deliver an enhanced customer experience.